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While U.S. equity markets were closed for Good Friday, futures tanked; Dow futures indicate a 142 point decline which would send the index back to 13,000 points. Underlying softness will definitely lead to renewed discussion about monetary accommodation and the possibility of Fed Chairman Ben Bernanke unleashing a third round of quantitative easing, or QE3.

In what Nomura’s analysts called a “very disappointing report,” the Bureau of Labor Statistics announced meager job creation in March after what had been above-trend reports over the last couple of months. Market expectations were high, with consensus calls for a 205,000 rise to NFPs, but the economy disappointed.

Adding only 120,000 jobs in March means the unemployment rate ticked down to 8.2%, but all of that was due to a decline in the labor force participation rate, which remains stuck near record lows at 63.6%. The total number of unemployed totals 12.7 million, while those without a job for 27 weeks or more (“long-term unemployment”) make up 42.5% of the labor force. As Bernanke has repeatedly said, long-bouts of joblessness leads to structural unemployment as skills erode and potential workers fall further out of workforce.

Another troubling sign is the high number of workers that are “marginally attached to the labor force,” or those that haven’t looked for a job in the last 4 weeks but are willing and able to work. That number stays at a very elevated 2.4 million.

March NFPs missed expectations by a wide mark, suggesting market players and economists were over-optimistic about the economic environment. On the one hand, Nomura’s analysts suggest that “some payback from three strong months fueled by good weather might have had a significant negative impact.” But the 120,000 jobs added in March were still way off.

Construction jobs, for example, fell 7,000 over March. The ailing construction sector, which is very sensitive to the weather, is a further indication of the depressed state of housing markets. With home-prices continuing to fall down the rabbit hole (Case-Shiller home price indices continue to hit new lows), one can’t expect the housing market to stop pulling the economy down any time soon (despite the impressive stock price performance of Lennar and KB Home decent move in 2012).

Retail weakness is also troubling, where the economy shed 34,000 jobs in March after a 29,000 loss in February. Retail sales were actually up over the last couple of months, with firms like Target and Gap looking solid, as Forbes’Steve Schaeferpointed out.

Equity markets have rallied strongly this year as economic data began to look more promising. Much of the optimism that has been priced in appears to be misplaced, as Jim Baird of Plante Moran Financial Advisors explains:

[Friday's] result is also an indication that the recent uptick in the pace of job creation may have been illusory. While the markets were encouraged by the recently stronger pace of job growth, the actual rate of job creation may not have quickened to the degree that the data suggests.

Healthy skepticism persists about the calculation of seasonal adjustments, which is intended to help paint a more accurate picture of the real trend. In recent months, concerns had been raised that seasonal adjustments had been overstating reported job creation. Today’s report suggests those concerns may have been legitimate.

Risk assets tanked over the last couple of weeks on the assumption that Bernanke and the Fed wouldn’t continue to add monetary stimulus, with gold among the biggest losers. The latest FOMC statement, coupled with the minutes from that meeting, were interpreted as an acknowledgement of the improved economic situation, which in turn took QE3 off the table for now.

Friday’s weak report forces the discussion to gravitate back to a more QE3-prone environment. While the weak number alone isn’t enough to force the Fed into action in the upcoming April 24-25 FOMC meeting, as Barclays’ analysts argue, “the soft employment numbers certainly leave the door open for further accommodation and may shift the decision point to the June FOMC as the Fed continues to monitor the incoming data.”

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southernsandman maybe you can educate me this topic. I am having trouble seeing a direct link between the “social unrest” here and the Arab spring there. I see one based on a diluted dollar making US exports cheaper and absorbing some demand from Arab exports but most Arab countries rely heavily on oil exports and we know the price there is determined by OPEC. If anything the arab countries are profiting quite nicely these days from the reduced Iranian supply, pushing prices up and overall revenues. If you are referring to aftermath of Arab springs then I submit that has little to do with the U.S. and everything to do with the people’s desire for a different governmental structure. Perhaps you can elaborate on your point for me?

But I agree that presently it appears pumping more liquidity into the system appears to be increasing prices a greater clip than production. But this reality can also change as M2 is showing signs of increasing. An short term run up of M2 can have a sudden and positive effect on employment and hopefully give the positive shock the economy needs. It’s in the long run that excessive liquidity becomes a problem.

But overall I think this is not enough economic data to get Bernanke and the Fed to even begin considering QE3. A quarter’s worth of dismal employment growth will get them thinking twice. But also the seasonally adjusted employment figures coming from the BLS have been very volatile of recent. This is due to the dramatic changes experienced during the financial crisis that tends to throw off their season adjustment factors. I believe they are using X11 at this point but I am not sure.

I notice that national headlines keep trumpeting the fact that the unemployment rate is dropping, which is cited by the mainstream media as proof that Obama’s stimulus plans and his quantitative easing programs are finally beginning to work. There’s just one problem. While unemployment rates may be dropping, the employment rate has not increased very much at all. Looking back for ten years the following chart shows the employment percentage rate for all working age Americans:

Americans, especially conservatives have noticed the biased slant of the mainstream media which has become especially evident since the 2008 Presidential campaign. The MSM moved Heaven and Earth to ensure that Obama was elected. For more than three years we have regretted it. Nothing is better. The national debt has more than doubled and is now nearing 16 trillion dollars. What did we get for this prodigal borrowing extravaganza? All we got was deeper in debt, and yet the employment rate is still hovering at only 58%. What did we get for the systematic devaluation of our currency by printing money? All we got was inflation, and so we notice that everything costs more, especially that fill-up at the gas station. The national media doesn’t want to mention any of this. Instead we get propaganda:

I beg to differ. We have been reporting on the underlying reasons for the lower unemployment rate for years (i.e. the fact that the participation rate keeps falling). While a lower unemployment rate is a good thing, it isn’t the only variable you should take into account (as you point out in your comment). But don’t just assume no one’s pointing it out when the Forbes article you just read (and I would argue Forbes is pretty mainstream) actually does show that same number you’re pointing out.

How is the inflation we’ve been experiencing out of the ‘ordinary’ ? I say that cautiously because the normal inflation rate is different depending on if you are describing pre early 1970′s or post early 1970′s. But I agree with your getting ‘deeper in debt’ comment. The last almost 40 years has been mainly about using excess liquidity to fund riskier than entities and then finding a way to absolve that risk while making a profit. Smart bankers have profited nicely from this era of easy money. Wouldn’t be surprised if most of those bankers were the one’s working behind the scenes of the financial crisis. It’s been like one big long life living cash cow for them.

America needs local jobs to be created by those big companies who fooled the Government and the people by offshoring the manufacturing jobs. Computer hardware and Electronics giants can themselves add over a million jobs to the economy resulting in billions of dollars in tax revenue for the Government. This may result in a slight inflation, but it will be extremely rewarding in the medium to long term. What is more worrisome is the fate of 500,000+ fresh graduates graduating from the top Universities of the world (in USA each year) on top of those already retrenched.

One of the most overlooked stories of the poor economy is people who have abandoned the job hunt, many of whom are not near retirement age. Media skim over this, but when several million people have diminished lifestyles, this will have ripple effects on the overall economy. Consumers lack the means – and the heart – to participate in an economic revival.

The Federal Reserve is interesting in that it is NOT a direct part of the U.S. Government but a privately owned set of banks – many of them outside of the U.S. And, they control our future – for whose benefit?

120,000 jobs were added in March 2012 (far below the expected 200,000), yet the unemployment rate drops from 8.3% to 8.2%. The reason given is some 110,000 (mainly women) left their jobs.

On the average, 250,000 jobs need to be created every month for the fresh job-seekers, and the base of labor force keeps expanding. Granted that there has been a 0.1% drop, the actual number of unemployed is actually increasing. (mtd1943)